Lemos v Coutts (Cayman) Ltd
| Jurisdiction | Cayman Islands |
| Judge | (Levers, J.) |
| Judgment Date | 12 April 2005 |
| Court | Grand Court (Cayman Islands) |
| Date | 12 April 2005 |
(Levers, J.)
A. Steinfeld, Q.C. and J. Stephens for the plaintiffs;
M.T.F. Briggs, Q.C. for the defendants and D. Blayney for the first and second defendants.
(1) Armitage v. Nurse, [1998] Ch. 241; [1997] 2 All E.R. 705, applied.
(2) City Equitable Fire Ins. Co. Ltd., In re, [1925] 1 Ch. 407; [1924] All E.R. Rep. 485, dicta of Romer J. applied.
(3) Cropper v. SmithELR(1884), 26 Ch. D. 700, referred to.
(4) Johns v. Johns, [2004] 3 NZLR 202, considered.
(5) Jokai Tea Holdings Ltd., In re, [1992] 1 W.L.R. 1196; [1993] 1 All E.R. 630, referred to.
(6) Lawrance v. Lord NorreysELR(1890), 15 App. Cas. 210, dicta of Lord Herschell, applied.
(7) Paragon Fin. plc. v. D.B. Thakerar & Co., [1999] 1 All E.R. 400, distinguished.
(8) Schmidt v. Rosewood Trust Ltd., [2003] 2 A.C. 709; 2001–03 MLR 511, applied.
(9) Target Holdings Ltd. v. Redferns, [1996] 1 A.C. 421; [1995] 3 All E.R. 785, considered.
(10) Vaudin v. Hamon, [1974] A.C. 569, referred to.
(11) Wenlock v. Moloney, [1965] 1 W.L.R. 1238; [1965] 2 All E.R. 871, referred to.
Grand Court Rules, 1995 (Revised), O.18, r.12: The relevant terms of this rule are set out at para. 28.
O.20, r.5(2): ‘Where an application to the Court for leave to make the amendment mentioned in paragraph (3), (4) or (5) is made after any relevant period of limitation current at the date of issue of the writ has expired, the Court may nevertheless grant such leave in the circumstances mentioned in that paragraph if it thinks it just to do so.’
O.20, r.5(5): ‘An amendment may be allowed under paragraph (2) notwithstanding that the effect of the amendment will be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment.’
Limitation Law (1996 Revision) (Law 12 of 1991, revised 1996), s.27: The relevant terms of this section are set out at para. 39.
s.37: ‘(1) Subject to subsection (3), where in the case of any action for which a period of limitation is prescribed by this Law, either-
(a) the action is based upon the fraud of the defendant;
(b) any fact relevant to the plaintiff”s right of action has been deliberately concealed from him by the defendant; or
(c) the action is for relief from the consequences of a mistake,
the period of limitation does not begin to run until the plaintiff has discovered, or could with reasonable diligence have discovered, the fraud, concealment or mistake. References in this subsection to the defendant include references to the defendant”s agent, and to any person through whom the defendant claims, and his agent.
(2) For the purposes of subsection (1), deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.’
Trusts-breach of trust-wilful default-amendment permitted to change beneficiaries” cause of action from negligent to wilful breach if based on substantially same facts as already pleaded
Trusts-breach of trust-knowledge of breach-if facts deliberately concealed by trustee, by Limitation Law (1996 Revision), s.37, no running of time until beneficiary has actual or constructive knowledge of facts
Trusts-beneficiaries-right to ensure proper administration of trust-even discretionary beneficiaries have right to invoke court”s inherent jurisdiction to ensure proper administration of trust-proprietary interest not necessary
Trusts-beneficiaries-beneficial interest-arguable that discretionary beneficiaries have no ‘future interest’ in trust for purposes of Limitation Law (1996 Revision), s.27(3) and right of action for breach by trustees never accrues
The plaintiffs applied for leave to re-amend their statement of claim to allege that breaches of trust by the defendant trustees, which had already been pleaded, were wilful or reckless.
A Greek-based shipping business was settled on professional trustees in the Cayman Islands. Disagreements between the beneficiaries over the management of the trust were later resolved by modifying the protection afforded to the trustees and giving them additional policy guidance. The revised protection was to be available to the trustees except in the case of wilful misconduct or wilful breach of trust. The plaintiff beneficiaries, the first and second plaintiffs being discretionary beneficiaries, brought an action against the successor trustees, alleging substantial losses through mismanagement of the shipping investments. The proceedings in the Grand Court are reported at 2003 CILR 381, and in the Court of Appeal at 2004–05 CILR 77. Amendments to the statement of claim sought to establish that the trustees had in fact acted in wilful default or recklessly
in breach of trust, and so would not be able to rely on the exoneration clauses. The claim to re-amend was based on facts disclosed as a result of discovery commenced in 2000.
The plaintiffs submitted that (a) they were allowed to examine trust documents, investigate the trustees” management of trust affairs and await completion of discovery before applying to perfect their pleadings by re-amendment for dishonest breach of trust; (b) the proposed amendments merely set out matters that needed to be established for the court to be able to conclude that the alleged breaches of trust were wilful or reckless, the utmost detail not being required by Grand Court Rules, O.18, r.19; (c) separate particulars in respect of each defendant were not required, as it was their case that they acted unanimously; (d) the amendments did not raise a new cause of action which remained that of breach of trust; (e) even if they did raise a new cause of action, it arose out of the same or substantially the same facts as the original cause of action already pleaded and was therefore permitted by Grand Court Rules, O.20, r.5(5); and (f) under s.37(2) of the Limitation Law, the relevant facts relating to a deliberate breach of duty were deemed to have been deliberately concealed by the defendants and time did not therefore start to run until the plaintiffs could with reasonable diligence have discovered the concealment before discovery; as this took place less than six years earlier, even a fresh cause of action relating to the relevant facts would not be statute-barred.
The defendants submitted in reply that (a) given the seriousness of the allegations, they were insufficiently particularized, and the pleadings did not therefore clearly and with full particularity allege credible facts which if proved would give rise to an inference of impropriety; (b) the particulars had to relate distinctly to the separate defendants; (c) if any inference were to be drawn from the trustees” creation or receipt of certain documents, the creation or receipt of those documents had to be pleaded; (d) the amendments referred to a new cause of action concerning acts or omissions occurring more than six years earlier which was therefore statute-barred; (e) the first and second plaintiffs were statute-barred and did not come within s.27(3) of the Limitation Law (1996 Revision) as, being discretionary beneficiaries, their interest in the trust property had not fallen into possession; and (f) the amendments did not arise out of discovery but as a direct response to the trustees” reliance on exoneration clauses in the revised settlement.
Held, allowing the amendments sought:
(1) A fair trial would be possible based on the pleadings as amended, as the defendants were aware of the case they had to answer. Each amendment gave the necessary particulars in accordance with the Grand Court Rules, O.18, r.12 and the facts and matters pleaded were capable of being regarded as wilful misconduct or recklessness, to be determined at trial. If the individual defendants provided no further details in their amended defences, given that the plaintiffs” case was that the trustees
acted unanimously, the particulars did not need to refer to individual trustees (paras. 37–38).
(2) The essence of the amendments sought, being the element of want of probity in wilful default and recklessness, might amount to a new cause of action. Nevertheless, it was one based on substantially the same set of facts as the original cause of action, albeit portrayed in a different light after discovery, in respect of which relief had already been claimed. The amendments to raise it were therefore expressly permitted by the Grand Court Rules, O.20, r.5(5) (para. 14; paras. 49–50).
(3) Alternatively, if the facts that came to light as a result of discovery were to be considered to be entirely new facts, it had to be presumed (by virtue of s.37(1) and (2) of the Limitation Law) that they had been deliberately concealed by the defendants prior to discovery, which meant that the time for limitation purposes did not start to run until the plaintiffs obtained discovery. The plaintiffs were not, therefore, statute-barred from making the amendments (para. 51).
(4) The discretionary beneficiaries had the right to invoke the court”s inherent jurisdiction to ensure the proper administration of the trust fund, for which they did not require a proprietary interest. Although, since the amendments had been allowed it was not necessary to decide the matter, when considering s.27(3) of the Limitation Law (1996 Revision) it was arguable that they did not have a future interest in the trust and therefore that their right of action for breach of duty by the trustees could not be treated as having accrued in the first place (paras. 46–47; para. 50).
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